The Tokyo Metropolitan Government slashed funding costs thanks to rampant global demand for the first social bond offered by a local government in Japan.
The coupon of 0.005% is half the going level for plain five-year municipal notes priced earlier this month. Applications for the five-year social bonds outstripped the ¥30 billion issue about 12 times, enabling the reduction in funding costs, according to Goldman Sachs Group Inc., one of the banks underwriting the deal.
"A yield of 0.01% is low enough, so major institutional investors at first voiced resistance to an even lower return,” said Satoru Kawahito, head of public sector and infrastructure banking at Goldman Sachs in Japan. Still, the investors decided to buy the bonds soon after the marketing began, he said. "We think there was an ESG premium in the deal.”